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Belief Distortions and Macroeconomic Fluctuations / Francesco Bianchi, Sydney C. Ludvigson, Sai Ma.
- Format:
- Book
- Author/Creator:
- Bianchi, Francesco.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27406.
- NBER working paper series no. w27406
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- This paper combines a data rich environment with a machine learning algorithm to provide new estimates of time-varying systematic expectational errors ("belief distortions") embedded in survey responses. We find that distortions are large even for professional forecasters, with all respondent-types over-weighting their own beliefs relative to publicly available information. Forecasts of inflation and GDP growth oscillate between optimism and pessimism by large margins, with biases in expectations evolving dynamically in response to cyclical shocks. The results suggest that artificial intelligence algorithms can be productively deployed to correct errors in human judgement and improve predictive accuracy.
- Notes:
- Print version record
- June 2020.
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